Political Science

Open English Borders

by on March 3, 2015 at 7:30 am in Economics, Law, Political Science | Permalink

I am in favor of open borders for economic and moral reasons. It’s not crazy, however, to be concerned about some of the potential consequences of immediately opening borders between countries with very different income levels, culture or history. It is crazy, however, to fear opening borders between countries with similar income levels, culture and history. Thus, I fully support the petition of the Commonwealth Freedom of Movement Organisation:

Because of the unique relationship and socio-economic bonds that the U.K, Canada, Australia and New Zealand share, we believe that each country can benefit from a free movement agreement with each other, similar to the policies of the European Union and the Trans-Tasman Travel Arrangement (T.T.T.A) between Australia and New Zealand.

We propose that the governments of the aforementioned countries finalise agreements (and inevitably, legislation) which make it possible for citizens to move freely with no restrictions regarding work permits or visa controls.

Amen to that.

The only problem with agreements like this is that the very big gains come from opening up borders between countries that are different. Still, I am for lowering transportation and transaction costs. I do hope, however, that more people will come to appreciate that the right to move is a human right and not just a right of the British and their colonial cousins.

Addendum: Open Borders Day is coming on March 16. Write about open borders–pro or con–on that day. Let’s peacefully debate.

American military commanders rarely seek out deserters and even more rarely punish them.  At the height of the Iraq War, fewer than 5 percent of deserters received a court-martial, and fewer than one percent served prison time.

And:

…the only deserters who have consistently been punished by the American military are those who went to Canada.

The full article, by Wil S. Hylton, is interesting throughout.

That was quick…

by on February 28, 2015 at 10:26 am in Economics, Political Science | Permalink

Greece called into question on Saturday a major debt repayment it must make to the European Central Bank this summer, after acknowledging it faces problems in meeting its obligations to international creditors.

There is more here, most of all showing the Greeks have not obtained much leverage from the talks.  They are in a deep liquidity squeeze, even post “agreement.”  The Bundestag overwhelmingly approved last week’s “deal,” whereas the Greeks don’t even want to vote on it.  So who won that round?  The on-paper ability to be flexible with a primary surplus — that isn’t real any more — just isn’t worth very much right now.

Michael Pettis has an excellent short essay on this point, here is one (scary) excerpt:

A debt crisis must be resolved quickly because there is a self-reinforcing component within the process that can be extraordinarily harmful. High levels of sovereign debt create uncertainty about how the costs of resolving the debt will ultimately be assigned. This uncertainty causes growth to slow by adversely changing the behavior of a wide variety of stakeholders in the economy (as I will describe later). As the economy slows, contingent liabilities within the banking system rise, tax revenues decline and fiscal expenditures rise, all of which push up sovereign debt levels even further and increase both the cost of resolving the debt and the uncertainty about how the costs will be assigned. The consequence of this self-reinforcing deterioration in the sovereign balance sheet is, at first, a slow grinding away of the economy until the market reaches some point, after which the process accelerates and debt can spiral out of control.

Hat tip goes to the ever-excellent The Browser.

That is the new Robert D. Putnam book and it focuses on the widening opportunity gap among America’s young.  Much of the work is narrative and case studies, starting with Port Clinton, Ohio but not stopping there.  Any Putnam book is an event, and this one is the natural sequel to Charles Murray’s Coming Apart.  The writing and the underlying intelligence are of an extremely high quality.

One significant theme is that upward mobility results from a mingling of the upper and lower income classes, and such mingling is more scarce than in the immediate postwar era.  You can think of it as case study evidence for the cross-sectional statistical regularities stressed by Chetty et.al.  Contra Chetty, however, Putnam believes that declines in socioeconomic mobility will start to show up in the data as current generations age.

The book’s problem is finding a new note to strike.  Putnam stresses this is a story of social forces rather than personal villains, but, for all the merits of his text, he identifies no new culprits or solutions.  Inequality of opportunity seems to have more to do with parents than schools, but how to control parents?  This book does not flirt with the so-called Neoreaction.  Putnam favors increased access to contraception, professional coaching of poor parents, prison sentencing reform and more emphasis on rehabilitation, eliminating fees for school extracurricular activities, mentoring programs, and greater investment in vocational education; contra Krugman he gives a lot of evidence for skills mismatch (pp.232-233).  More generally, he asks for federalist solutions and lots of experimentation.  Maybe those are good paths to go, but the reader feels (once again) that matters will get worse before they get better.  There is very little on either political economy or the evolution of technology.

Do read this book, but by the end Putnam himself seems to come away deflated from dealing with some of America’s toughest problems.

I’ve been receiving numerous requests for more of my “totally conventional views,” and someone asked me about HRC.  We’ve never covered her in the past, so why not?  But by construction of this series, none of what follows is at all new and probably there won’t be any discussion in the comments.  But with that in mind, I’ll offer up these points:

Hillary

1. Women are judged far more by their looks than are men, and Hillary’s are not right for the presidency.  She doesn’t seem composed enough, schoolmarmish enough a’ la Thatcher, and frankly many men, when they see her in their mind’s eye, imagine a voice saying “Look here, buster…!”  Her hair is not properly ordered for the Executive Office, and I suspect many Americans want for their first female President to appear somewhat ageless.  I am not suggesting any of this is fair or even an efficient form of Bayesian statistical discrimination, but it is a reality.

2. If not for factor #1, a healthy Hillary would be a shoo-in for demographic reasons, but as it stands her chances of winning are overrated.

3. A Clinton Presidency is the most likely of any, from the major candidates, to serve up significant and enduring market-oriented reforms.  She could bring along enough Democrats to work with the Republicans, and reclaim a version of the old Clinton legacy.  That said, her presidency also is more likely to effect change in the opposite direction as well, so the net expected value here is hard to calculate and still may be negative.

4. Given #1 and #2, and other gender-related factors, your opinion about Hillary, no matter what it may be, is less reliable than you think.  That suggests you should think about her less rather than more (sorry people for this post, what did Wittgenstein say about that ladder?), because I don’t think you’re going to see much of a payoff from grabbing here at that third derivative.

5. The willingness of the Clinton Foundation to solicit donations from foreign governments and leaders is corrupt, and yet mostly receives a free pass, in spite of some recent coverage on corporate donations.  I read recently they might stop soliciting donations “…if Hillary runs for President,” also known as “hurry up and give now!”  Arguably we would be electing a political machine as President of the United States, even more than usual.

6. Democratic intellectuals and operatives are quite unexcited — or should I say “fervently and passionately unexcited” — about the prospect of a Hillary candidacy.  The energy is already drained from the room, and they haven’t opened the door yet.

7. There is still the question of how the press, and the American people, might process any subsequent revelations about Bill’s “activities” since leaving the White House.

8. It will be hard to avoid giving the public “Hillary fatigue,” given how many years she has been in the public eye.  This is another reason why I think her chances are overrated, plus she will have to be very careful to carry herself in the debates just the right way, see #1 and #2 again.

9. It is easier to transcend race than gender.

Here is evidence for the Roberts Higgs thesis and, if I recall correctly, some recent remarks by Thomas Piketty on revolution and tax progressivity (does anyone know the link?).  Juliana Londoño Vélez writes:

Abstract    I argue that progressive income taxation in the twentieth century is a product of the exigency of war and not of democracy. I obtain long-run series of the top marginal personal income tax rate for a large sample of OECD countries, and use data on wars of mass mobilization and democracy from the Correlates of War data set and Scheve & Stasavage (2012) to test this hypothesis. My results suggest that wars of mass mobilization (i.e. wars in which more than 2% of the population served in the military) cause substantial increases in tax progressivity. These effects are persistent and do not vanish upon the conclusion of war.

The full paper is here (pdf), taken from the generally interesting Berkeley Economic History Lab list, as cited by Barry Eichengreen.  As Barry notes, see also the revised and much improved version of Lemin Wu’s paper on the Malthusian trap (pdf).

Also, unlike Silicon Valley, the Stasi was regulated.

That is from Bryan Appleyard.

That is the newly published volume 16 of The Collected Works of F.A. Hayek, edited by Sandra J. Peart.  Of course this is splendid from beginning to end, including Peart’s introduction, the letters, Hayek’s commentary, and assorted documents, and the book even contains three very nice poems written by Harriet Taylor.

Is Hayek here blaming Taylor for moving Mill in a collectivist direction?  Is that the Straussian reading of this book and the reason why Hayek did it?

If there were a phrase for “one step above and beyond self-recommending,” this volume would get it.

The Economist, referring to “six-party politics,” reports:

In 1951 the Conservative and Labour parties together scooped 97% of the vote; in May, opinion polls suggest, they will each win barely a third.

You will note that the UK has a fairly strict “first past the post” system, so if such fragmentation happens in their system perhaps it could happen anywhere.  A second Economist article offers a few hypotheses about why this is happening:

1. People are now used to shopping in markets, and on the internet, for exactly what they want.

2. Politics has become increasingly multi-dimensional; this article cites the possibility that a “libertarian-authoritarian” axis may be replacing “left-right,” or consider the issue of Scottish independence.

3. Perhaps current politicians are less skilled than Thatcher and Blair at attracting the allegiance of a broad cross-section of British society.

I worry that the general decline of discretionary government spending may make politics less stable (but also more interesting, not necessarily in a good way).  When there is plenty of spending to bicker about, politics revolves around that question, which is relatively harmless.  When all the spending is tied up, we move closer to the battlefield of symbolic goods, bringing us back to “less stable and more interesting.”  If that is a cause, this trend is likely to spread.  (In a new paper David Schleicher argues that electoral reform may not stop polarization and splintering.)

Arguably a good deal of American politics is a cloaked debate over whether a particular kind of Christian worldview ought to enjoy higher or lower social status.  Since Britain doesn’t have much religion, perhaps that is why they are fragmenting in so many other directions.  Exactly which British debate is supposed to be imposing the uni-dimensionality on the political spectrum?

That is a new and provocative paper by James Edward Mahon Jr. of Williams College, the abstract is here:

This paper explores the relationship between government size and economic freedom, relating these patterns to theories of fiscal politics. In order to address current political controversies, it uses data on pre-1990 OECD members (minus Norway) for central government tax revenues and spending, as well as indicators of economic freedom derived from the Fraser Institute, ICRG, Heritage Foundation, and the World Bank. It finds that it matters a great deal whether we define size as expenditures or taxation. Spending has no relationship with freedom, or a negative one, across this data set. Initial tax revenue levels, however, positively predict subsequent changes in economic freedom. We find similar patterns using different measures of economic freedom and whether we use annual data (1995-2010) or overlapping six-year averages going back to 1970-75. These results challenge the common preconception that taxes and economic freedom are negatively related. In addition, the divergence between tax revenue and spending in this regard is more consistent with a “fiscal contract” model of the state, in which taxation and economic freedom go together, as governments attend to their legitimacy and the health of the private sector in order to increase revenue, but flag in these efforts when they enjoy sources of income other than taxes.

For the pointer I thank the excellent Kevin Lewis.

In 1971 — when the North Sea oil was just beginning to flow — the average Norwegian was about as poor as the average Greek…

That is from Matthew C. Klein at the FT, the post on Norway is interesting more generally.  Here are my earlier remarks on whether Norway is an economically overvalued country.

Addendum: See the comments, it is not obvious this is true, I will look into the matter (but must teach shortly).  You can see in this OECD data source that, in 1971, Finland is only barely richer than Greece per capita, ppp-adjusted.  Via Klein on Twitter, here is the original source, from Norges Bank through BIS, but it seems to run counter to the other numbers.  Matt has some follow-up tweets here.

Syriza will deal. As with the “troika,” there’ll be a change in vocabulary so they can minimize loss of face, but they’ll deal. They simply don’t have a choice if they plan to remain in power very long.

Not only do most Greeks oppose Grexit, but the sympathies of far too much of the Greek army and law enforcement agencies are, frankly, not with Syriza. Nobody knows if they’ll acquiesce to being paid in drachmae and not deutschmarks by the grandsons of “anarcho-communists.”

Neither, incidentally, do the rest of the EU gain anything from another failed state and/or Russian client in the Balkans.

By now, they’ll have told Varoufakis, in some form, formally (during discussions) and informally (during networking breaks):

“Yanis. We get it. You’ve made your point. Greece is a miserable place right now. There’s a lot of it going around. Listen to us. Please. We secretly care about Greece enough not to want another 1967 or Balkan war. You don’t have to believe that, but it’s true.

“We may have overdone it. Fine. We’re flexible. But seriously—if you walk away we’re looking at another 1967 when you run out of cash. Greece will become an even more miserable place real fast. Do you want our help or not?”

That is from Richard Besserer.

No one knows.  Nor should you react too much to the latest headline or tweet.  The further apart the various parties appear to be, the more the whip of concession gets cracking.  The closer to an agreement they may seem, the greater the incentive to play hardball and demand further concessions.  So short-run news reports are hard to interpret, don’t obsess over them.  A given swing very often implies a counter-swing in the opposite direction, even if the latter has not yet made a headline.  So the direction of the last-reported swing just doesn’t contain that much information.

We won’t know until the proverbial “fat lady” sings, namely deposits leave the country at a critical pace, or not, or the ECB cuts off Emergency Liquidity Assistance, or not.

So why, then, do I believe that Greece will leave the eurozone?

First, I do not see that (most) extant commentary is properly accounting for the very recent fiscal collapse of the Greek economy.  I am not sure there is any fix, and the expression “failed state” comes to mind.  The momentum here does not seem to be positive.

Second, I do not assume Syriza — whom I have called The Not Very Serious People — have a coherent bargaining strategy at all.  I take this point from a broader reading of history, where I see that quite often leaders in critical positions simply do not know what they are doing.  By no means is that always the case, but it is more often the case than narrative-imposing journalism encourages us to perceive.

Third, I believe we as observers tend to overestimate the permanence of trends/state of affairs which have lasted ten to fifteen years or more.  That included the Great Moderation and that also includes Greece in the eurozone.  In a broader historical perspective, the arrangement simply doesn’t make sense to me, as there is more than one Europe.  So I am willing to predict its end.  And the next year seems like a quite possible time for that end to come about.

Fourth, I still don’t think enough commentators are stressing how much the creditor eurozone countries see this as a nested game, where concessions to Greece would have to imply larger concessions elsewhere and embolden Podemos in Spain.

Fifth, it is hard to see Greece being in truly safe territory for the next few years to come, even if a handy bargain is dispatched over the next day or two.

I gladly admit all of those reasons are speculative rather than firm or based in concrete information.  But that is what I think and why.  I don’t consider this kind of prediction to be very scientific, but still we proceed by engaging in discourse and, next time around, seeing what we got wrong the time before.

Kevin Drum reports an anomaly:

…here’s the rate of anti-Semitic incidents in the U.S., as tallied by the Anti-Defamation League. What you see is a peak in the early 90s and a decline ever since. This is exactly the same thing that you see in rates of violent crime in general. In other words, as violent crime fell, violent crime directed at Jews also fell. This makes sense.

But the global picture is quite different. Partly this is probably due to the fact that the worldwide numbers come from a different source (the Kantor Center in Tel Aviv) and are tallied up using a different methodology. But I doubt that accounts for the stark contrast: worldwide, anti-Semitic attacks have been on a straight upward path ever since the late 90s. This is despite the fact that violent crime in Europe, which accounts for most of the incidents, has followed a trajectory pretty similar to the U.S.

Kevin also reports that the Canadian pattern is closer to Europe than to the United States.  You also can find some charts at the link.

Are there any reasonable explanations which involve economic factors?